Question 1

On January 1, Barton Co. purchased land with a usable building on it for $425,000. At the time of purchase, the fair market values of the land and building were $170,000 and $340,000, respectively. What is the cost Barton should allocate to land?

Accepted Answer

The answer of On January 1, Barton Co. purchased land...

Question 2

Carson Co. purchased a printer for $10,000, for which it paid $1,000 a month for 10 months. Carson had the option of paying $9,500 cash for the printer but chose the delayed payment plan. It cost Carson $80 to transport the printer to its place of business and $200 for installing and initial timing adjustments to the printer. Calculate the cost of the printer.

Accepted Answer

The answer of Carson Co. purchased a printer for $10,000,...

Question 3

Use the information that follows concerning Harrahs, Inc. to answer problems 22 through 24.
Harrahs Corporation purchased a dump truck at the beginning of 2008 at a cost of $60,000. The truck had an estimated life of 5 years and an estimated residual value of $5,000. On January 1, 2010, the company made major repairs of $3,000 to the truck that extended its life 2 more years. Starting with 2010, the truck has a remaining life of 5 years. The company uses the straight-line depreciation method.
-What amount should be recorded as depreciation expense each year starting in 2010?

Accepted Answer

The answer of Use the information that follows concerning Harrahs,...

Question 4

Raymond Corporation is a new business that recycles consumption leftovers. The investors in Raymond's stock, expecting losses in the early stages of business, are impressed with its early net incomes resulting in the ballooning of its stock price to $32 a share. During the second year of operations, Raymond's reported net income of $1,300,000. However, a few months later, independent auditors reported existence of accounting irregularities concerned with the capitalization of $3 million dollars of expenditures to Raymond's land account that should have been expensed. What is the appropriately adjusted net income for the second year of operations?

Accepted Answer

The answer of Raymond Corporation is a new business that...

Question 5

On January 1, equipment is purchased for $40,000 with an 20-year life expectancy and salvage value of $4,000. If the double-declining-balance method is used, how much depreciation expense is recorded for the first year?

Accepted Answer

The answer of On January 1, equipment is purchased for...

Question 6

On September 30, 2010, equipment is purchased for $50,000 with a 4-year life expectancy and salvage value of $2,000. If the double-declining-balance method is used, calculate depreciation expense for the year ending December 31, 2010.

Accepted Answer

The answer of On September 30, 2010, equipment is purchased...

Question 7

On January 1, Weston Company paid $88,000 for a copy machine. It was estimated that the machine would produce 1,000,000 copies over the next 8 years, at which time it would have a salvage value of $8,000. During the first and second years, the copies totaled 180,000 and 300,000, respectively. Calculate depreciation expense using the activity method for each of the first two years.

Accepted Answer

The answer of On January 1, Weston Company paid $88,000...

Question 8

Use the information that follows concerning Harrahs, Inc. to answer problems 22 through 24.
Harrahs Corporation purchased a dump truck at the beginning of 2008 at a cost of $60,000. The truck had an estimated life of 5 years and an estimated residual value of $5,000. On January 1, 2010, the company made major repairs of $3,000 to the truck that extended its life 2 more years. Starting with 2010, the truck has a remaining life of 5 years. The company uses the straight-line depreciation method.
-If Harrahs sells the truck at the end of 2010 for $20,000 cash, how much gain or loss would be recognized?

Accepted Answer

The answer of Use the information that follows concerning Harrahs,...

Question 9

On January 1, equipment is purchased for $55,000 with an 8-year life expectancy and salvage value of $5,000. If the double-declining-balance method is used, calculate the book value of the equipment at the end of year 2.

Accepted Answer

The answer of On January 1, equipment is purchased for...

Question 10

On January 1, Marriott Company paid $80,000 for a copy machine. It was estimated that the machine would produce 200,000 copies over the next 8 years, at which time it would have a salvage value of $8,000. During the first and second years, the copies totaled 24,000 and 51,000, respectively. Calculate accumulated depreciation using the double-declining-balance method at the end of year two.

Accepted Answer

The answer of On January 1, Marriott Company paid $80,000...

Question 11

On April 1, 2004, Cardot Co., which uses straight-line depreciation, purchased equipment for $60,000 with a useful life of 7 years and $4,000 salvage value. On April 1, 2008, the equipment was sold for $30,000. What gain should Cardot recognize as a result of this disposition?

Accepted Answer

The answer of On April 1, 2004, Cardot Co., which...

Question 12

On April 1, Tarpon Co. made the following expenditures on its printing press:
  The renovation increased the expected life and the attachment increased the productivity of the press. What are the total expenditures capitalized to the printing press?

Accepted Answer

The answer of On April 1, Tarpon Co. made the...

Question 13

Farmdale Company's President purchased an extremely used automobile on November 1 by paying $2,000. He immediately had it towed to his mechanic who overhauled the auto in order to get the car ready to be safely driven. The cost of the tow was $40 and the initial overhaul was $1,500. While driving from his mechanic's garage, he ran over a nail that punctured a tire and cost $35 to repair. Calculate the cost of the auto.

Accepted Answer

The answer of Farmdale Company's President purchased an extremely used...

Question 14

On January 1, Summers Co. purchased equipment with a 10-year life and zero salvage value for $900,000. Summers uses the straight-line method on its financial statements and double-declining-balance method on its income tax returns. By what amount does the tax deduction for depreciation exceed depreciation expense on Summers's income statements for each of the first two years?

Accepted Answer

The answer of On January 1, Summers Co. purchased equipment...

Question 15

On January 1, Bisbee Co. paid $80,000 for a new truck. It was estimated that the truck would be driven 400,000 miles during the next 8 years, at which time it would have a salvage value of $8,000. At the end of the first and second years, the odometer registered 45,000 and 97,000 miles, respectively. Calculate the book value of the truck using straight-line depreciation at the end of the second year.

Accepted Answer

The answer of On January 1, Bisbee Co. paid $80,000...

Question 16

Harvey Ltd. purchased land and building in exchange for 50,000 shares of its stock that is trading on the New York Stock Exchange at $20 a share. Although the market values of the purchased assets are unknown, the current assessed value of the land is $300,000 and the building is $600,000. How much is assigned to the land and to the building?

Accepted Answer

The answer of Harvey Ltd. purchased land and building in...

Question 17

Calculate depreciation expense for each of the first two full years of life for an airplane with a cost of $600,000, residual value of $40,000, and an estimated life of 4 years under the double-declining-balance depreciation method.

Accepted Answer

The answer of Calculate depreciation expense for each of the...

Question 18

Courtney Corp. has significant stock that can be issued by the company. The managers are planning to sell the stock for a large profit by fraudulently inflating reported earnings. They plan to sell the stock after current earnings are reported, then leave for the carnival in Brazil. To accomplish their devious plans, they purchased inventory for $800,000 and charged the inventory purchase to equipment that is being depreciated using the straight-line method with a life of 8 years and no salvage value. If beginning and ending inventories were correctly stated and a full year's depreciation is recognized on the equipment, what is the amount of Courtney's current net income overstatement?

Accepted Answer

The answer of Courtney Corp. has significant stock that can...

Question 19

Use the information that follows concerning Harrahs, Inc. to answer problems 22 through 24.
Harrahs Corporation purchased a dump truck at the beginning of 2008 at a cost of $60,000. The truck had an estimated life of 5 years and an estimated residual value of $5,000. On January 1, 2010, the company made major repairs of $3,000 to the truck that extended its life 2 more years. Starting with 2010, the truck has a remaining life of 5 years. The company uses the straight-line depreciation method.
-How much is the book value of the truck to be reported on the balance sheet at the end of 2009?

Accepted Answer

The answer of Use the information that follows concerning Harrahs,...

Question 20

On January 1, 2008, Blackwell Company paid $88,000 for a new delivery truck. It was estimated that the truck would be driven 300,000 miles during the next 6 years, at which time it would have a salvage value of $7,000. At the end of the first and second years, the odometer registered 48,000 and 88,000 miles, respectively. Show how the plant asset would appear in Blackwell Company's balance sheet at December 31, 2009 assuming the company uses the activity method depreciation.

Accepted Answer

The answer of On January 1, 2008, Blackwell Company paid...

Quiz 9: Long-Lived Assets

On January 1, Barton Co. purchased land with a usable building on it for $425,000. At the time of purchase, the fair market values of the land and building were $170,000 and $340,000, respectively. What is the cost Barton should allocate to land?

On January 1, equipment is purchased for $40,000 with an 20-year life expectancy and salvage value of $4,000. If the double-declining-balance method is used, how much depreciation expense is recorded for the first year?

On September 30, 2010, equipment is purchased for $50,000 with a 4-year life expectancy and salvage value of $2,000. If the double-declining-balance method is used, calculate depreciation expense for the year ending December 31, 2010.

On January 1, equipment is purchased for $55,000 with an 8-year life expectancy and salvage value of $5,000. If the double-declining-balance method is used, calculate the book value of the equipment at the end of year 2.

On April 1, 2004, Cardot Co., which uses straight-line depreciation, purchased equipment for $60,000 with a useful life of 7 years and $4,000 salvage value. On April 1, 2008, the equipment was sold for $30,000. What gain should Cardot recognize as a result of this disposition?

On April 1, Tarpon Co. made the following expenditures on its printing press: The renovation increased the expected life and the attachment increased the productivity of the press. What are the total expenditures capitalized to the printing press?

Calculate depreciation expense for each of the first two full years of life for an airplane with a cost of $600,000, residual value of $40,000, and an estimated life of 4 years under the double-declining-balance depreciation method.